Revolutionizing The Energy Sector

If Bloom Energy’s technology fulfills its potential, homes and businesses could one day generate their own electricity and fuel their own vehicles. It builds what are called solid-oxide fuel cells, in which water, oxygen, and a hydrogen source such as natural gas, are pulled through the cell to cleanly generate electricity. The secretive Silicon Valley firm, which has raised hundreds of millions of dollars in venture capital, is one of 26 companies chosen as a 2010 Technology Pioneer by the World Economic Forum.

Around 1.5 billion people, or nearly a quarter of the world’s population, live without electricity today. That’s according to figures from a November U.N. report centering on the plight of people in places like South Asia and sub-Saharan Africa who lack access to modern energy. Many of these “powerless” live as humans did centuries ago, in darkness and cooking over wood fires that damage their health and the environment.

To halve the proportion of people living in poverty by 2015-one of the U.N.’s eight Millennium Development Goals-1.2 billion more people must gain access to electricity and 2 billion more need to obtain other fuels such as natural gas or propane, according to the U.N. But building traditional power grids would take too long, cost too much, and only add to the world’s climate change woes.

Enter Bloom Energy, one of 26 winners named on Dec. 3 by the World Economic Forum as 2010 Tech Pioneers offering new technologies or business models that could advance the global economy and have a positive impact on peoples’ lives. Through its cutting-edge work with fuel cell technology, the Sunnyvale (Calif.) company aims to help homes and businesses generate their own electricity and fuel their own vehicles-bringing power and light to remote villages and even reducing dependence on today’s electricity grids in the developed world.

The technology at the heart of Bloom Energy’s vision to help planet Earth was first developed for use in outer space. While working as a director of the Space Technologies Laboratory at the University of Arizona, the company’s Indian-born co-founder and chief executive, K.R. Sridhar, was asked by NASA to come up with a way to make life sustainable on Mars. His lab’s initial project was a device that would use solar power and Martian water to drive a reactor cell that generated oxygen to breathe and hydrogen to power vehicles.

The project set Sridhar thinking. If he reversed the reaction-feeding air, water, and methane into a fuel cell to generate electricity-he could change the way people generated and consumed energy. He developed the first of his so-called Bloom boxes to do just that, but took it a step further by making the process reversible. That way, when hooked up to a renewable power source such as a wind turbine or solar panel, the refrigerator-sized unit makes and stores hydrogen and oxygen. And at night or when the wind dies down, it changes direction and uses the stored gasses to make electricity.

“I quit doing my NASA work because I believe this particular technology can change the world,” says Sridhar. “Just like developing nations leapfrogged over fixed telephony to mobile, we think our technology will allow developing nations to do the same thing for electricity.”

The Bloom box also has another benefit that could become increasingly important if the world’s automakers succeed at developing hydrogen-powered vehicles. Since one of the by-products of the Bloom fuel cell is hydrogen, the device could be used to create fuel for cars. And even if hydrogen fuel cell vehicles don’t materialize for decades, Bloom boxes could generate electricity for hybrid or electric cars. Either way, the system would allow people to sidestep traditional gas stations.

With his ideas in hand, Sridhar approached venture capitalists Kleiner, Perkins, Caulfield & Byers, and the venerable Silicon Valley firm responded by making its first- ever clean tech investment. Precise funding figures aren’t public, but Bloom Energy says it has raised “hundreds of millions” of dollars in financing. The company’s valuation has been pegged in press reports at over $1 billion.

From the start, the eight-year-old company has been shrouded in secrecy, and its executives remain tight-lipped. But some details are slowly leaking out. Stu Aaron, Bloom Energy’s vice-president of marketing and product management, confirms press reports about a University of Tennessee trial in which a Bloom box capable of powering a 5,000 square foot home proved twice as efficient as a traditional gas-burning system and produced 60% fewer emissions.

The company won’t comment on reports that the city of San Jose recently granted online auction giant eBay permission to install five fuel cells from Bloom Energy that will generate up to 500 kilowatts of power, nor that search giant Google is separately testing the system. But Bloom Energy does confirm it’s aiming its initial systems at business customers who want to explore whether they can get reliable green energy at the same price or less than they now pay the electric company.

Why all the secrecy? To date, fuel cells have under-delivered on their promise, says Aaron, so Bloom Energy says it wants to wait until it has solid field experience with real customers to tell its full story.

What is known is that the company’s fuel cell technology is different from hydrogen fuel cells, which have been around for decades. For starters, Bloom’s system relies primarily on oxygen rather than hydrogen. And instead of requiring expensive precious metals, the fuel cell is built from a cheap ceramic material, sand. That should allow it to be more easily mass produced, helping cut costs and widen its potential market.

The ceramic core acts as an electrode. At high temperatures, a hydrocarbon fuel-ethanol, biodiesel, methane, or natural gas-on one side of the cell attracts oxygen ions from the other. As the ions are pulled through the solid core, the resulting electrochemical reaction creates electricity. Though the technology consumes hydrocarbons, Sridhar says, it doesn’t involve carbon-releasing combustion, so it emits only about half the greenhouse gases of conventional energy sources.

If the technology works as envisioned on a commercial scale, Bloom boxes could help cut carbon emissions and energy costs in the developed world, where they’re likely to be used as a compliment to, rather than a replacement of, traditional power grids. But the biggest impact will be in villages throughout the developing world that are now cut off from power supplies. “Access to electricity is a life enhancer,” Sridhar says. “It means access to information, access to education, to clean water, and to good health because refrigeration will prevent food from spoiling.”

Sridhar figures it will take three to five years before Bloom boxes reach “grid parity” for home use, or price competitiveness with traditional residential scale electric supplies. Replacing gas stations is expected to take longer, and depends on the emergence of new vehicles. “We are really building an industry, not a company,” says Sridhar. “We need an entire supply chain around us to scale.”

Then again, the company is based in Silicon Valley, where people know how to do that. The flat sand electrodes used in Bloom boxes, for instance, could be manufactured using some of the same processes now used by the Valley’s chipmakers. Synergies like that are what lead Bloom Energy executives to hope they can someday create an equally important new industry that will help power the world in whole new ways.

Informilo has syndicated this story and others about the 2010 tech pioneers to BusinessWeek.